Why is the Bank of Queensland (ASX:BOQ) share price trading at 7-month lows?

What’s wrong with the BoQ share price lately?

| More on:
man looking stressed at ATM

Image source: Getty Images

The Bank of Queensland Limited (AS:X BOQ) share price finished yesterday’s trading at $8.60, up 0.82%.

That might seem inocuous. But zooming out, and the picture doesn’t quite look as rosy. At this share price, Bank of Queensland is now at a 7-month low. We hadn’t seen this ASX bank at the current share price levels since back in March. That’s quite an abrupt fall in value. Especially, considering we have seen Bank of Queensland shares shed a nasty 4% or so since last Friday alone. So what’s going on here?

Well, we might apart some blame to the decision of this company to be among the first banks to tighten up its loan assessment criteria. Last Thursday, BoQ announced that it will implement the higher interest rate buffer prescribed by the Australian Prudential Regulation Authority (APRA). Banks used to assess a client’s ability to repay their loan with an interest rate 2.5% greater than the loan’s actual rate. This will now be lifted to 3%. When this news came to light, it initiated a share price drop for the bank last week.

Bank of Queensland shares hit hard by ex-dividend

But another big reason why Bank of Queensland shares have fallen so much over the past week has been a good one for shareholders. That might seem paradoxical, but BoQ traded ex-dividend last Thursday as well.

As we covered at the time, shareholders will be receiving this ASX bank’s final dividend payment for FY2021 of 22 cents per share, fully franked, on 18 November. This dividend is the largest Bank of Queensland has paid out since the onset of the coronavirus pandemic. As such, it also resulted in a large share price drop when the value of this dividend left the BoQ share price last Thursday. 

So it seems that Bank of Queensland’s present 7-month low can mostly be blamed both on lukewarm investor sentiment in light of its decision to tighten its lending standards. As well as its ex-dividend share price loss.

It might not be all bad news though. As my Fool colleague Tristan covered over the weekend, broker Citi has rated the Bank of Queensland share rice as a ‘buy’. That came along with a 12-month share price target of $10.50. That implies a future potential upside of 22.1% over the next 12 months, not including any dividend returns.

At the last Bank of Queensland share price, this ASX bank had a market capitalisation of $5.51 billion. It also had a dividend yield of 4.53%

Should you invest $1,000 in Bank of Queensland right now?

Before you consider Bank of Queensland, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Bank of Queensland wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Bank Shares